This is a series of Q & A interviews with Nicki Kinton of NK Credit Consultancy in which PPD is looking at the typical excuses that suppliers often hear when chasing late payments, and asking Nicki how best to handle them.

Excuse #8 – I am unable to raise manual cheques

I know cheques are antiquated these days but, in your experience, how many organisations no longer have a chequebook?

There are still a significant number of businesses paying by cheque in the UK. In 2017 more than 400 million cheques were used across the UK for both business and domestic payments and to acquire cash.

Cheques need to go through a clearing process and this may take a few days. The money isn’t taken from the payer’s bank account until the bank has confirmed there are funds available so cheques are a good way for a business to uphold its contractual obligation to pay, whilst holding on to the funds for a little bit longer.

Additionally, some businesses insist on paying by cheque because it gives the owner a sense of control.

Medium to larger sized businesses, who have a lot of outgoing payments are more likely have printable cheques rather than a chequebook and will have set print run dates.

In your experience is this generally a legitimate excuse or an effort to try it on?

It certainly can be a delaying tactic but often the internal red tape involved in getting a single cheque printed (or typed) can be very onerous and it may be quicker to wait for the scheduled print run.

Surely for a customer that gives this explanation, the simple option is to go the BACS or Direct Debit route?

Always ask for BACS in these cases. Direct Debit takes time to get set up and there are still a surprising number of businesses that are reluctant to sign up to Direct Debit as they feel it removes the control of payments from them to their supplier.

Honestly, this explanation sounds like the kind of thing that should really be clarified in advance of signing a contract. Do you think there’s any excuse for suppliers not being aware of this in advance?

I think it’s vitally important to understand from the outset of the relationship what your potential customer’s payment processes are, including, available payment methods, authorisation and key personnel involved in the process (or at least job roles).

Knowing the process allows you to tailor the timing and content of your credit control calls to get the best possible outcome.

Are there any other payment methods aside from BACSand/orDD that suppliers should consider proposing for large denomination payments from their customers?

Bank Transfers and DD are the best methods for cleared funds and once set up are easy to manage.

You could also provide the facilities to take payment by debit card or credit card, particularly for smaller businesses. I wouldn’t advise taking cash, unless for small values or in a retail environment, as that could leave you vulnerable to money laundering schemes (depending on your product or service).

I would recommend regularly (every 6 months or at least annually) writing to all customers still paying by cheque encouraging them to switch to Bank Transfer or Direct Debit. Every time you will get some that migrate, making managing receipts easier overall.

It’s also a good idea to set out your expectations from the beginning with new contracts and only accept payment by these methods as part of the contract. Cheques are not legal tender in the UK, they never have been, so you are not obliged to accept them.

This is a series of Q & A interviews with Nicki Kinton of NK Credit Consultancy in which PPD is looking at the typical excuses that suppliers often hear when chasing late payments, and asking Nicki how best to handle them.

Excuse #7 – I dispute the payment

What does this usually mean? That the amount is disputed or that the entire premise of the invoice/payment is disputed?

This is vague enough to mean anything! In my experience it’s most likely to mean one of the following:

A pricing dispute

A quality dispute

A delivery dispute

This excuse sounds like a delaying tactic to tie up the supplier in a dispute while delaying payment. Is that often true?

Pricing and delivery disputes are more often genuine, though not always in the customer’s favor. Usually, there has been some misunderstanding over the price quoted, perhaps your pricing is on a sliding scale tied to quantity and the customer has ordered a different quantity than usual. Or you may have recently introduced price changes which have not been updated in your customers’ systems.

It may, however, be an error on the invoice. This often occurs when your customer is on non-standard pricing tariff and you accidentally use the standard pricing on the invoice, or a promised discount hasn’t been applied.

There’s much that can go wrong with delivery from incorrect quantity delivered to damaged goods or a dispute over the delivery charge.

However, disputes over quality can be quite subjective, particularly with services, and are often a delaying tactic.

Presumably the presence of a solid paper trail is vital in resolving issues like this?

Most definitely. Quotes should be sent in writing and acceptance should be received in writing, even if this is done with an email confirmation following a verbal quote and acceptance.

If the query has arisen because of a pricing change, having a document trail of when and who was informed of the changes helps to resolve the issue quickly.

Delivery notes should all be linked to an invoice and all deliveries should be signed for. Where possible goods should be inspected before accepting a signature, not so easy to control if you’re using a third-party delivery service.

Your terms and conditions should be very clear about quality and what the customer has a right to expect from you.

How often do these kinds of dispute end up in legal action?

Very few in my experience. Possibly because of the desire to maintain goodwill, particularly in the case of pricing or delivery queries.

In your experience what are the best ways to resolve this kind of dispute without a major falling out?

Most importantly, investigate each query and act on it quickly. If the same sort of query is occurring regularly revisit your processes and controls to see what needs to be done to stop it happening in the future.

Have a transparent dispute resolution process, which include timeframes and keep the customer updated regularly with the investigation.

Prevention is always better than cure!

Always be open and honest with your pricing. If you are giving estimates instead of quotes be sure to be very clear with your customer the basis on which you have to provide the estimate and the likelihood of, and possible reasons why the actual costs could be more than the estimate. Keep your customer informed at all times of issues likely to affect the cost.

Be clear in your communications with customers about your prices; are they inclusive or exclusive of VAT, what other costs may be involved (e.g. delivery charges), are they subject to change and under what circumstances?

Set expectations regarding quality within your Terms & Conditions and communicate regularly with your customers so that any quality issues are picked up quickly and not left unidentified until it’s time to pay.

If you do everything you can to resolve a dispute fairly and equitably the relationship with your customers should remain intact and may even improve if they see you to be delivering great customer service under testing circumstances.

This is a series of Q & A interviews with Nicki Kinton of NK Credit Consultancy in which PPD is looking at the typical excuses that suppliers often hear when chasing late payments, and asking Nicki how best to handle them.

Excuse #5 – Cheque is in the post

This sounds like a classic delaying tactic, based on your extensive experience how often would you say it’s likely to genuinely be the case?

It’s probably the most popular fob off in the book. Not helped by the fact that there’s a general perception that the postal service is unreliable and underperforms, therefore supporting the assertion that it’s at fault.

Assuming it is a stalling tactic, what should be the supplier’s next move?

You should ask for the date sent, by what class of postage and the cheque number. Of course, they can’t provide the latter if they’ve not sent it! If they can’t give you the cheque number ask why not? You may get some interesting reasons, be prepared to challenge them by asking if it really has been sent yet.

The post can be unreliable at times, if I were trying to delay payment my next play would be to suggest the cheque got lost in the post and to wait a while longer.

What can a supplier do to counter this kind of persistent delaying tactic?

This depends on how long ago the customer is suggesting they sent it. If only a couple of days then agree to wait a couple more (with the above details obtained). If it’s been more than a week then ask them to cancel the cheque and send a replacement BACS/Faster payment with the assurance that you will return the cheque to them or destroy it should it ever arrive.

Direct debit or bank transfer both seem like obvious work arounds but what if a customer refuses to go that route?

Unfortunately, even in this modern electronic age there are still many businesses that insist on paying by cheque. These are usually business were the owner/director feels more in control of their money by having to physically sign a piece of paper to make a payment. BACS doesn’t have quite the same feel of control and Direct Debit means relinquishing control completely!

This applies to consumers too, particularly more “senior” customers who may not be so comfortable around electronics and the internet, though this is lessening.

You have every right to refuse to accept cheques, but with that decision you have to accept that there will be some businesses or consumers who won’t want to buy your goods or services because you don’t. You need to look at your customer demographic and decide if the loss of a few late paid cheque payments would have a significant impact on your business.

Are there any circumstance in which a cheque might be a genuinely better mode of payment?

I really can’t think of any. With the advances in online and mobile banking you should be able to pay for just about anything, from anywhere. I can’t remember the last time I wrote a cheque.

A perceived advantage from the buyers’ perspective is that they delay payment, because funds aren’t taken out of their bank account until it’s presented at the bank. So even if they pay you on time, you don’t get the funds on time.

From the sellers’ perspective cheques are easily lost, do not represent cleared funds so can bounce and mean you have to physically go to the bank to pay them in.

This is a series of Q & A interviews with Nicki Kinton of NK Credit Consultancy in which PPD is looking at the typical excuses that suppliers often hear when chasing late payments, and asking Nicki how best to handle them.

Excuse #4 Our payment terms have changed

This seems like a mechanism used by large companies as a means of hanging on to cash for longer, is that a generally fair assessment?

Not just larger companies, though it a more common occurrence coming from larger businesses.

How is it even possible for payment terms to change halfway through a contract?

It’s not unusual for parties to want to vary the terms of an existing contract. Circumstances change, markets change and contracts need to be responsive to those changes.

That said, one party cannot arbitrarily decide to change the terms of a contract. Any amendment is considered by law to be a contract and needs to be agreed by both parties. If one of them does not agree to the changes, then they will not be enforceable.

What should a supplier do if payment terms change without having first formally agreed terms?

If you have not formally agreed terms then you have put yourself at risk of uncertainty and misunderstandings. Trading without having any defined agreed terms can create implied acceptance, i.e. by trading you have accepted the terms under which that transaction took place.

If something changes, such as payment terms and you continue to trade then implied acceptance could also apply, therefore it’s important to use this opportunity to step back and negotiate terms that are appropriate for both parties.

Be prepared to walk way from the relationship if the new terms would create a level of risk that is detrimental to your business.

Is it possible for payment terms to be changed even after they have been agreed?

As mentioned above it is possible for either party to propose an amendment to the existing contract, however for that amendment to be enforceable it need to be accepted by both parties.

Acceptance should be express acceptance, i.e. written acknowledgement of the changes and the willingness to abide by the changes.

Remember if you continue to trade after the new payment terms have been brought to your attention that could be considered as implied acceptance.
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What would you say is the best way to avoid this situation from the outset?

Always make sure that you negotiate terms with any supplier before you start doing any business with them.

Have them in writing and signed by representatives of both parties.

Make sure that all involved in the payment process are made aware of these terms before the first payment is due.

Have regular reviews with your customer, that way if something is happening in their business that may prompt them to look for a change in terms you are already aware and could be in a position to offer an alternative solution if you can’t accept the change in terms.

This is a series of Q & A interviews with Nicki Kinton of NK Credit Consultancy in which PPD is looking at the typical excuses that suppliers often hear when chasing late payments, and asking Nicki how best to handle them.

Excuse #3 Can’t afford to pay the bill

This excuse seems pretty desperate. Do you think it’s a generally credible explanation?

This often a very difficult thing for a business to admit to. Some never do, preferring to bury their head in the sand, and end up in terminal decline and insolvency very rapidly.

Circumstances can change rapidly for a business. The loss of a major client or a sudden hike in costs will have a dramatic impact on a business’s cashflow.

Unfortunately, as always, there are businesses out there who will buy from you knowing they can’t afford it. Effective due diligence should weed these ones out but there are always some that slip through the net.

I have seen ratings for companies on PPD where this explanation was given yet they continue to trade. Surely this can often be just a temporary state of affairs, can’t it?

Often it is temporary, and as a supplier you can earn a lot of customer loyalty by being supportive through this difficult time for them.

Talk to your customer about their situation. If you feel they are being honest and open with you and you believe it is a temporary situation you don’t need to pull the plug on your relationships with them.

Look at the customers financial statements. If you don’t understand them that’s fine, ask someone who does to give you an assessment of the ratio of their debtors compared to their sales. If they’re being paid very slowly, causing them cashflow issues, debtors will be a significant proportion of their sales.

Offer them a payment plan to clear existing debt with the understanding that any business transacted whilst there remains a debt will have to be cash with order. They may need what you’re supplying to trade out of the situation.

Once the original debt is cleared, review your customers circumstances again and agree new terms for moving the relationship forward.

If a customer really can’t pay the bills and is in terminal decline (possibly due to late payment issues of their own), what do you advise creditors do?

Firstly, stop supplying, don’t make the problem any worse.

Agree a payment plan to reduce the debt.

It may be tempting to try and support the business as you would if you believed the situation to be temporary, but be aware that if their business fails you don’t want yours to be taken along for the ride.

If they are keen for you to continue to supply because they need what you have to keep trading, establish what their plans are for getting out of the situation. If these seem viable and you really do want to support them protect yourself with robust terms for the foreseeable future, which must always include payment with order.

What should creditors do if they only find out once the company has gone into liquidation, such as in the case of Carillion, and assuming there is no hope of govt. support?
In all insolvency cases there will be an opportunity for creditors to submit a claim. Make sure your invoicing is up to date and that any invoice queries have been resolved before submitting your claim. That will make sure that it truly represents what you are owed.

If you are not contacted by the Liquidator and invited to lodge a claim it may be that you are not listed as a creditor on your customers records. Look up the liquidator on Companies House, call and ask for a claim form. Don’t miss out.

By submitting a claim, you will be kept informed of the details of the liquidation. The likelihood of receiving all your money is very low, but It is possible you may receive a small dividend.

What would you say is the best way to avoid this situation from the outset?

Know your customer and have regular communication with them.

Many small businesses are guilty of trading with whoever wants to buy their stuff. Others will undertake some form of due diligence, such as a credit reference agency report, at the start of the relationship.

This isn’t enough. As said before, circumstances can change at the drop of a hat and you need to have your finger on the pulse so you know when those changes happen. Most credit reference agency’s offer a monitoring service, which will alert you to things like changes of directors, the issuing of County Court Judgements or the late filing of financial accounts at Companies House. All of these things can be indicators of trouble. Keep an eye on local news and social media and listen to the grapevine of your network.

If you see or hear anything that may indicate a potential problem discuss it with your customer and establish what sort of impact it could have on you. Use their responses to decide whether to keep trading with them and if the terms need to change to reduce the risk to your business.

Giving another business time to pay is like giving them an interest free loan, so don’t give your money away to just anyone.

This is a series of Q & A interviews with Nicki Kinton of NK Credit Consultancy in which PPD is looking at the typical excuses that suppliers often hear when chasing late payments, and asking Nicki how best to handle them.

Excuse #2: Accounts clerk only comes in once a week

How often do you hear this excuse when managing credit control on behalf of your clients?

This is another common response particularly from smaller businesses.

When you think about it, a small business owner can’t do everything, and if they are trying to you’re probably encountering Excuse #1. But the business may not be big enough to have a full-time member of staff in every role so it is inevitable that you will encounter this situation if you are trading with smaller businesses.

Is it a legitimate excuse?

It’s a fact.

That’s not to say that there shouldn’t be some provision in the business for making urgent payments on the days the accounts clerk doesn’t work. Of course, you need to convince the business that you can’t, or shouldn’t have to, wait the 1-4 working days for the accounts clerk to next be in the office to get paid.

What would it cost your business if you waited those few days and what would it cost the relationship if you insisted on someone else making that payment there and then? The answers may depend on how overdue the invoice is and how many times you’ve already tried to obtain payment!

In your capacity as a credit management consultant who might also be on the customer’s side of the fence, what advice would you give suppliers to make sure they don’t keep missing the boat every week?

Find out which day of the week is the accounts clerk’s working day and plan your call for that day. Make sure you know the hours worked as well as the day of the week and get direct contact details.

When you know you have invoices falling due on their non-working days call them before they fall due to make sure everything is in hand.

What should a supplier do if they can’t get through to a busy accounts clerk that only comes in once a week?

Firstly, support your calls with an email, sent the afternoon of the day before their working day so it’s fairly near the top of their Inbox when they get in.

If you consistently can’t get through, despite having a direct dial phone number then escalate to the buyer, the business owner or the relevant department head and explain your inability to make contact. Outline what you need to happen, and arrange how to follow up in the most appropriate way.

As with all collections calls it’s important to keep your frustration out of it, stick to the facts and you are more likely to get the result you want. Show your frustration and you are likely to be met with defensive aggression.

Part time / consultant accounts clerks are hired for their expertise and time saving benefits, what if the customer keeps referring the supplier back to the accounts clerk?

This is a performance issue for them to manage and it’s ok to remind them of that (politely!).

Make it clear that you are only asking for them to work to the terms you both agreed to prior to any supply of goods or services. Remind them of their responsibilities according to the terms and ask them to advise why the accounts clerk is unable to meet those responsibilities. Often the customer has failed to communicate terms to the person responsible for making the payment!

You should also remind the customer of any provisions in the terms around late payment, such as the charging of interest and that their intervention will keep any additional costs to them in check.
As before, persistence is the key, regular, non-confrontational communication builds familiarity and rapport.

This is a series of Q & A interviews with Nicki Kinton of NK Credit Consultancy in which PPD is looking at the typical excuses that suppliers often hear when chasing late payments, and asking Nicki how best to handle them.

Excuse #1: Accounts are too busy

How often do you hear this excuse when managing credit control on behalf of your clients?

It’s quite a common response from smaller businesses when the person responsible for paying the bills wears more than one hat in the business. There isn’t an accounts team, just a person who does the accounts and they are probably focused on one of their other responsibilities at the time you call if you get this response.

You may also find that in some larger organisations the accounts payable team don’t take calls at certain times of day because the staff are focused on a particular task, such as query management or the payment run.

Unfortunately, though, sometimes it’s just an avoidance technique.

Is it a legitimate excuse? (It doesn’t seem so)

It’s easy to feel that you’re being fobbed off and that it’s not a legitimate excuse, but there will be instances, consider the scenarios mentioned above, when they really can’t talk to you at that time. You need to ask questions to see if it’s really true but remember never outright accuse a customer of being a liar!

What should suppliers do to ensure that accounts departments are not “too busy” to pay their bills?

It’s not up to you to make sure they’re not “too busy” to pay their bill. That’s up to your client’s management.

What you can do is check if this is a one-off situation or a regular ‘we’re not taking calls’ time and establish when would be the best time to call.

Get a specific contact name, a direct dial number and email address. Whilst we shouldn’t rely on electronic communications for collections activity it’s sometimes a useful way to get attention.

Consider the first scenario above. If the person who does the accounts is also the owner manager of the business they may well prefer email as they can deal with it outside of normal working hours.

Try calling on different days and at different times. Don’t forget to keep a record to keep track of the days and times so you don’t waste your time repeating the same ones. If you get the same excuse no matter when you try that’s a fairly good indication the customer is either stalling you or is incredibly disorganised!

Escalate! If the accounts team are not taking your calls, escalate to the FD or other Exec. Ask whoever you are speaking to or Use your sales teams’ relationship with the buyer to get information on the customers hierarchy. Again, get names, direct dial phone numbers and email addresses. Sometimes just asking for this information will be enough to “un-busy” the right person.

If they won’t give you the information you could try looking it up on their website. If it’s not there call reception and leave a message for the FD/CEO. You may not get the call back from the FD or CEO you tried to call but they may go and ask their accounts team why they are being hassled about an invoice!

In the end persistence is key. Regular and frequent. Just trying to call once a week will not be enough.

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